Mortgage Minute: ARM
www.kw.com An Adjustable Rate Mortgage may offer a lower initial interest rate and monthly payments than a conventional fixed rate mortgage. After an initial term, the interest rate on an adjustable-rate mortgage loan is re-set periodically to keep the rate in line with current market interest rates. For example, a 3 ARM loan offers a fixed rate for the first three years. The interest rate adjusts once a year thereafter. 5/1, 7/1 or 10/1 ARM loans offer a fixed rate for the first five, seven or ten years respectively, adjusting yearly thereafter. The lender sets the adjustable interest rate by adding a fixed percentage to an index rate. When the interest rate goes up, your monthly payment also increases. Most ARM loans have a periodic rate cap and lifetime cap to limit the amount the interest rate can increase each adjustment period and over the term of the loan. If your start rate is less than the fully indexed rate your interest rate and monthly payment may increase significantly at the first adjustment — even if the Index does not change. And, your interest rate and monthly payment will increase even more if the Index rises. Discuss with your mortgage professional how an adjustable rate mortgage may be the solution to your financing needs. For more information, please contact a Citi Mortgage Consultant at 1-877-693-0217.